Egypt Interim Leader Sworn In as Islamists Targeted

A man celebrates at Tahrir Square after a broadcast confirming that the army will temporarily be taking over from the country's first democratically elected president Mohammed Morsi in Cairo on July 3, 2013. Photographer: Gianluigi Guercia/AFP/Getty Images

July 5 (Bloomberg) -- The Egyptian authorities moved to
arrest Muslim Brotherhood leaders as a military-appointed
interim president was sworn in with the challenge of healing a
polarized nation following the ouster of Mohamed Mursi.

The Brotherhood’s senior leader, or general guide, Mohammed
Badie, was taken into custody July 2, the day before Mursi was
removed from power by the army, the state-run Ahram Gate website
said yesterday. The state-run Middle East News Agency said the
former general guide, Mahdy Akef, was also detained, and a
warrant was issued for the arrest of the group’s deputy chief,
Khairat el-Shater, South Cairo prosecution official Ahmed Ezz
el-Din said by phone.

Egypt’s new leadership is taking action on two fronts after
removing Mursi a year into his term as the first democratically
elected civilian president. His exit followed four days of mass
protests in the capital and across the country.

The military says it’s determined to bring about national
reconciliation. Even so, the arrests and the imposition of
travel bans on Mursi and other Islamist leaders, as reported by
state-run media, may upend the stability efforts, with
supporters of the ousted president scheduled to protest across
Egypt today.

Al Arabiya television reported today that gunmen attacked
Egyptian army outposts in the Sinai peninsula. The television
channel, citing its own reporters, said there were numerous,
coordinated attacks lasting about 15 minutes.

‘Military Coup’

“We declare our unequivocal rejection of the military coup
against the elected president and the will of the people and
refuse to participate in any action with usurpers of power,”
the Muslim Brotherhood said in a statement yesterday. “We call
on demonstrators to show restraint and commitment to
peacefulness. We denounce repressive practices of the police
state.”

Fireworks lit up the night sky in central Cairo yesterday
evening as those opposed to Mursi descended on Tahrir Square,
where celebrations continued. Chants of “the people have
brought down the regime” and “long live Egypt” rang out.

The injury toll from yesterday’s politically motivated
clashes in Egypt stood at 101, Ahram Gate said, citing health
ministry official Khalid al-Khatib. The official said 96 of
those injured were in Mursi’s home province of Sharqiya in the
Nile Delta.

Armed Forces

Egypt’s armed forces said in a statement on their Facebook
page that the nation’s people have a right to protest and
express their views, while cautioning that the misuse of those
rights could threaten “civil peace.” The military’s statement
also called for national unity.

The new president, Adly Mansour, 67, promoted just days
earlier to chief justice of the Supreme Constitutional Court,
inherits stewardship of a nation with a sluggish economy, a
political landscape fraught with uncertainty and the opposition
of disgruntled Mursi supporters.

“The greatest thing accomplished on June 30 is that it has
united all of the people, without differentiation or
discrimination,” Mansour said at his inauguration in Cairo
yesterday, referring to the first of several days of rallies
that paved the way for Mursi’s ouster.

The veteran judge, deputy to the head of the constitutional
court since 1992, spoke in the same chamber where Mursi was
sworn in a year ago. Mursi and the justices locked horns in
battles that left his Islamist backers complaining about a
judiciary they said was biased against them.

Travel Bans

The travel bans issued against Mursi and the other
Islamists were linked to allegations that include inciting
violence, according to MENA.

Both Badie and el-Shater, who was initially fielded for the
presidency only to have the bid scuttled, were widely seen by
Mursi’s critics as the real power behind the presidency.

The military’s moves against the Islamists harked back to
the repeated crackdowns the group endured under successive
Egyptian presidents -- pressure that was released only after the
revolt that pushed Hosni Mubarak from power in 2011 opened the
door for their move from prison to the president’s office.

“The Brotherhood remains a potent force -- arguably still
the country’s most powerful social movement,” Toby Iles, Middle
East and Africa economist at the Economist Intelligence Unit in
London, said in response to e-mailed questions. “If there is to
be sustainable progress towards greater political stability, it
will be imperative for the interim administration to find a way
of including the Brotherhood in the political road map, and the
administration has suggested it will try to do this.”

‘All Firmness’

The Muslim Brotherhood’s Freedom and Justice Party said it
“will stand against this military coup with all firmness, will
not cooperate with the country’s current administration, which
has usurped power, and will continue to work for the return of
legitimacy alongside all the forces that reject the coup,”
according to a statement citing Vice Chairman Essam El-Erian.

Pointing to the country’s poor economic performance,
protesters this week said they sought to take back control of a
2011 uprising they argue was subverted by Mursi and his attempt
to cement the Muslim Brotherhood’s power.

Standing in front of a group of opposition and religious
figures late on July 3, Defense Minister Abdelfatah al-Seesi
said Mursi “failed to meet and conform with the demands” of
the people. That forced them to act after a 48-hour ultimatum
had passed, which they did in consultations “without excluding
anyone,” he said.

Civilian Government

Al-Seesi said a civilian government will be convened, the
Islamist-drafted charter suspended and early elections held.

“We totally reject excluding any party, particularly
political Islamic groups,” the National Salvation Front, a bloc
that opposed Mursi, said in an e-mailed statement. “We stress
that the achievement the Egyptian people made lately obliges us
to reconcile with all parties and to confirm that the priority
now is to remain united while facing serious challenges.”

Egypt’s economy is in worse shape than it was during
Mubarak’s last days in office. With growth near the weakest in
two decades, unemployment stands at a record 13.2 percent. A bid
for a $4.8 billion International Monetary Fund loan has yet to
be accepted. Instead, the country has been relying on deposits
and other aid, predominantly from Qatar.

“The current turmoil is likely to depress economic
prospects further until the government can put Egypt on a
credible path towards greater political stability, which is
needed to reassure international investors and, of course,
tourists,” Iles said. Loan talks with the IMF “are likely to
remain in limbo,” he said, adding that finalizing a deal “will
likely have to wait until after elections actually take place.”

Even so, Egyptian bonds and stocks rose yesterday following
the military intervention.

The yield on 5.75 percent bonds due in April 2020 tumbled
149 basis points, or 1.49 percentage points, the most since the
notes were sold in 2010, data compiled by Bloomberg show. The
EGX 30 Index of stocks rallied 7.3 percent, the biggest jump in
more than a year.

“We will probably see the Islamist reaction divided in
two: some Islamists who will resort to violence, but also
Islamists who are going to think that they’ve played the long
game for eight decades, and will think strategically about
elections that they can win again,” said Hani Sabra, Middle
East director at the Eurasia Group in New York.